The Employer’s Test: Employee or Independent Contractor?
It is important to distinguish between employees and independent contractors because their status determines their remuneration and how they pay taxes.
An independent contractor is an independent business person who runs his or her own business but who does work for another business.
An employee is hired by a company to perform specific work at the discretion of the employer.
How to distiguish between an employee and an independent contractor:
- The Control Test
A test on control over the type of work the person does – the manner in which the work must be done and when the work must be done.
- Organisation Test
This looks at whether the person is part and parcel of the business. The persons work is integrated into the business and is not just an accessory to the business.
- Dominant Impression Test
This test is favoured by the courts and considers the employment relationship as a whole, rather that concentrating on only the one factor.
7 Traits of an employee
As per Section 200A of the Labour Relations Act (LRA), a person who works for, or renders service to any other person is presumed to be an employee if any 1 or more of the following factors are present:
- The manner in which the person works is subject to the control or directions of the other person.
- The person’s hours of work are subject to the control or direction of another person.
- The person forms part of that organization.
- The person has worked for that other person for an average of at least 40 hours per month over the last 3 months.
- The person is economically dependent on the other person for whom they work or renders services.
- The person is provided with tools of trade or work equipment by the other person.
- The person only works for or renders service to 1 person.
An employee is bound by the contract of service while an independent worker is bound by a contract for service. The employer has the responsibility and power to control over his employees, whereas for the independent contractor there is no power of control but the party requiring the services can determine the date for the work to be done.
What about the payment?
An employee is entitled to the payment of wages and salaries, where an independent contractor is entitled to payment of fees or retainer and the need for the contractor to submit payment invoices for each piece of work completed. If the worker is an employee they are subjected to the different Acts – for example, the employer is responsible to contribute to income tax and social security benefits. The contractor, on the other hand, is free and the party offering the services has responsibility over the work that has been assigned. The other matters are the responsibility of the original employer.
The concept of vicarious liability
The concept of vicarious liability exist in the relationship between employer and employee where the employer is liable for the wrong done by the employee while at work.
In the case of Century Insurance Co v Northern Ireland Transport Board(1942), the driver of a petrol tanker was engaged in transferring petrol to an underground tank when he lit a cigarette and threw the match to the floor. A fire was caused and an explosion occurred causing damages. The question was whether the employer was liable for this and the court held that the employer was liable for vicarious liability since the driver’s negligence was not independent of the contract of service but was merely a negligent way of discharging his actual duties under that contract of service.
ABOUT THE AUTHOR
Franzet Christine Schoeman obtained her BCom Law degree from UNISA. In furtherance of her BCom Law degree she also completed an Advanced Labour Law qualification successfully. She is currently employed as a SEESA Labour Legal Advisor at our Durban office.